New York's banks are bouncing back. Melissa Cohn reviews the mortgage sector - and Manhattan Mortgage, a market leader

In the past two months we have seen events in the US economy that we never thought we would see. Lehman Brothers filing for bankruptcy, major banks being taken over, AIG sold to the federal government and the federal government taking over control of our major lending sources Fannie Mae and Freddie Mac all causing tremendous turmoil in the financial markets. The federal government has not taken these events lightly and has gone into overdrive to work to stabilise the financial markets and help to unlock the credit freeze that we are experiencing. The Federal government has cut rates twice and passed an unprecedented $700 billion rescue package. We hope that all of these massive efforts will work their way down to Main Street and get the markets back to doing business.

Contrary to all of the negative press that banks are not making mortgages, they are lending and mortgages are being approved everyday. Clearly the mortgage marketplace has changed dramatically over the course of the past year but there are still plenty of banks that are still in the business of lending mortgages to today’s qualified buyer. The biggest change that we have seen is that banks are going back to doing business the old fashioned way – you have to qualify for the mortgage that you wish to close on.

So what does all of this mean for a foreign national buyer in today’s marketplace?
There are still a number of lenders in the New York marketplace that are willing to make mortgages for foreign national buyers. Jeffrey Firth, associate broker with Sotheby’s International Reality since 1987, has represented many of these international buyers through his global relationships within the Sotheby’s International Realty global network. Manhattan Mortgage is one such company Firth’s clients have used which offers the latest information technology with quality personal service. They simplify the loan process, ensuring a smooth experience from pre-qualification to closing. The first question that everyone asks is how much financing can they get. Each bank in New York has their own guidelines as to how much they are willing to finance in today’s market. A basic rule of thumb is that banks will allow foreign nationals to borrow up to 70 percent of the purchase price of the new apartment for a qualified buyer.

The key changes that we have seen with regards to loan approval are as follows:
•Banks are requiring that all borrowers verify their income in order to qualify for a mortgage, requiring verification of income both current and for the past two years.
•Banks are requiring that all borrowers verify the liquid assets that will be used for the purchase. The monies can be verified from any banking source in the world. Banks are also demanding credit references from your bank or current creditor.
•A year ago it was possible for a foreign national buyer to obtain financing without any of this documentation but as banks in the US are requiring all US citizens to verify their income and assets, the rules for foreign nationals are mirroring our domestic requirements. It is possible to get financing as a foreign national with no income verification but the percentage of financing allowed also drops significantly.

The next most frequently asked question is what type of mortgages are available to foreign national purchasers in New York today. The good news is that there are many types of loans available. Mortgages in the US typically have a term of 30 Years.

The most traditional mortgage in the US is a straight 30 Year Fixed rate. There is no rate risk and the loan pays itself off in 30 years. For buyers who don’t expect to hold their new property for the long term there are also adjustable rate options available. An adjustable rate mortgage is a loan that has a rate fixed for a period of time. Typically five, seven or ten years. At the end of the initial fixed rate period the rate resets on an annual basis subject to the market conditions. The adjustable rate mortgages can be interest-only for the first ten years allowing for a lower monthly payment. There are also Libor based adjustable rate mortgages where the rate adjusts monthly at approximately 1.5-2.00 percent above Libor. A great option for those who believe that rates will remain low for the foreseeable future.

US banks will allow foreign nationals to purchase in their own name and will also allow a buyer to take title to their new apartment in the name of an LLC or a Trust.
In summation the good news is that banks are making mortgages and with the values that can be found in the New York real estate market today, there is no reason why anyone shouldn’t come to New York and take advantage of one of the greatest real estate markets in the world.

Useful information
Jeffrey Firth
Sotherby’s International Reality
38 East 61st Street
New York, NY 10065, USA
Tel: +1 212 606 7673
jeffrey.firth@sotherbysrealty.com

Melissa L. Cohn, President
The Manhattan Mortgage Co, Inc.
555 Madison Avenue, New York,10022
Tel: +1 212-318-9494